Nasdaq, S&P 500, Dow Rally as Weak Jobs Data Fuels Fed Rate Cut Hopes

U.S. stocks surged with tech leading gains; softer labor reports boosted confidence in a September Fed rate cut while treasury yields hit 4-month lows.

The Nasdaq jumped 209.97 points (1%) to 21,707.69, the S&P 500 advanced 53.82 points (0.8%) to 6,502.08 and the Dow climbed 350.06 points (0.8%) to 45,621.29.

ADP released a report showing weaker than expected private sector job growth in the month of August. It said private sector employment rose by 54,000 jobs in August after jumping by an upwardly revised 106,000 jobs in July.

The Labor Department released a report showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended August 30th. The report said initial jobless claims climbed to 237,000, an increase of 8,000 from the previous week's unrevised level of 229,000. On Friday, the Labor Department is scheduled to release its more closely watched report on the employment situation in the month of August.

With the bigger than expected increase, jobless claims reached their highest level since hitting a matching figure in the week ended June 21st. The reports add to recent signs of weakness in the labor market, the data has also increased confidence the Federal Reserve will lower interest rates later this month. CME Group's FedWatch Tool is indicating a 99.4% chance the Fed will lower interest rates by 25 basis points at its September 16-17 meeting.

Computer hardware stocks moved sharply higher, driving the NYSE Arca Computer Hardware Index up by 3.5% to a record closing high. Networking stocks are substantially strong, with the NYSE Arca Networking Index surging by 3.2%. The index also ended the day at a record closing high. Ciena (CIEN) helped to lead the sector higher, soaring by 23.3% after reporting better than expected fiscal third quarter results. Oil service, housing and retail stocks too saw significant strength on the day while airline stocks came under considerable selling pressure as the day progressed.

Asia-Pacific stocks turned in a mixed performance. Japan's Nikkei 225 Index surged by 1.5% while China's Shanghai Composite Index slumped by 1.3%. European stocks moved mostly higher. The German DAX Index climbed by 0.7% and the U.K.'s FTSE 100 Index rose by 0.4%, although the French CAC 40 Index bucked the uptrend and dipped by 0.3%.

In the bond market, treasuries moved upwards, adding to the strong gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note which moves opposite of its price, fell 3.5 bps to a four-month closing low of 4.17%.

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